Tony's Ten: Happy New Year

14 January, 2013

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The U.S. has survived its fiscal cliff, Europe lives on – even the Japanese stock market is above 10,000 points (let’s ignore the fact that some 20 years ago it was pushing three times that level). The good times are back. Happy New Year.

Banks as technology companies

Banks are information processors. They need data on the assets and liabilities they try to balance and they need to process this data to understand the risks they face from doing this. In the past it was the people in the branch and the back office that performed most of the data processing and decision making function. Now, of course, banks are technology companies.

Some great research from Deutsche Bank shows just how intensive technology is in banks. Some of the key findings are:

‘Financial services firms will spend between USD 270 billion and USD 460 billion on IT in 2013 globally. IT cost figures in banking are estimates and differ substantially between different sources.

Measured as a percentage of revenues, financial services firms spend more on IT than any other industry. Banks’ IT costs equal 7.3% of their revenues, compared to an average of 3.7% across all other industries surveyed.

The structure of IT costs varies from market to market. For example, IT staff costs account for 26% of banks’ IT budget in America, whereas British banks spend 37% of their IT expenses on IT staff’.

It is interesting to note that they believe banks spend a greater proportion of revenues on information technology than telecommunications companies. Their research can be found at : IT in banks: What does it cost?